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A general Approach to the Construction of Model Diagnostics based upon the Lagrange Multiplier Principle

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  • Engle, Robert F

Abstract

In order to assess the validity of the specification of an econometric model, it is useful to have a variety of diagnostic statistics which might provide the evidence on the existence and possibly the type of misspecification involved. One source of diagnostics is hypothesis tests where the model under consideration is taken to be the null and the alternative is some general action. A particularly attractive approach is to construct optimal test statistics against a variety of specific alternatives. In this way it is possible to have reasonable power against a collection of interesting alternatives, although when looking at sets of non-independent statistics, one must be cautious about interpretations of the overall size of the test.

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  • Engle, Robert F, 1979. "A general Approach to the Construction of Model Diagnostics based upon the Lagrange Multiplier Principle," The Warwick Economics Research Paper Series (TWERPS) 156, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:156
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/1978-1988/twerp156.pdf
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    Cited by:

    1. Davidson, Russell & MacKinnon, James G, 1984. "Model Specification Tests Based on Artificial Linear Regressions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(2), pages 485-502, June.
    2. Rossi, Nicola & Schiantarelli, Fabio, 1982. "Modelling consumers' expenditure," European Economic Review, Elsevier, vol. 17(3), pages 371-391.
    3. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.

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